Ben-Artzi, who is suing the company for wrongful dismissal, told the US Securities and Exchange Commission that from 2007 to 2010 the bank misrepresented the value of a portfolio with a notional value of as much as $130 billion, Labaton Sucharow, the New York-based law firm representing Ben-Artzi, said on its website.

"The valuations and financial reporting were proper, and a significant portion of these positions were subsequently unwound in an orderly sale," Renee Calabro, a spokeswoman for Deutsche Bank in New York, said in a statement.

The claims were false, and the bank will continue to cooperate with the SEC's investigation, she said. Deutsche Bank may have lost $12 billion from the collateralised insurance agreements, known as leveraged super senior (LSS) credit derivatives, should they have been valued properly, the Financial Times reported earlier.

It cited estimates derived from comments by three former employees who testified to the SEC, including Ben-Artzi. Formerly of Goldman Sachs Group, he joined the bank in 2010, the FT said. John Nester, an SEC spokesman, declined to comment on the investigation, as did Ben Fischer, a spokesman for German financial markets regulator BaFin.

Deutsche Bank dropped as much as 2.2% in Frankfurt. The share fell 0.8% to 34.7, valuing the firm at 32.2 billion ($42 billion). Deutsche Bank failed to properly value a "gap option component" in the LSS portfolio between mid-2007 and 2010, Ben- Artzi said. The lender would have "substantially missed" earnings estimates even if it used conservative assumptions to properly value the instruments, according to the law firm.

"Deutsche Bank was the largest holder of LSS trades in the marketplace and by not correctly valuing it the bank was able to maintain its carefully crafted public image that it was weathering the financial crisis better than its peers," the law firm said.

Deutsche Bank has navigated the financial crisis sparked by the 2007 meltdown of the US housing market without direct state aid. Ben-Artzi, who has a doctorate in mathematics from New York University, sought to resolve his concerns internally before seeking legal representation and reporting the possible violations to the SEC whistle-blower program, Labaton Sucharow said.